Report: Fiat prepping to buy rest of Chrysler

Fiat S.p.A. is discussing financing options with banks to strengthen its balance sheet in preparation to buy the stake of Chrysler Group LLC that it doesn't own, three people familiar with the matter told Bloomberg.

Sergio Marchionne, CEO of both automakers, has held talks with banks to help pay for at least some of the 41.5 percent held by the UAW medical benefits trust for Chrysler retirees, said the people, who asked not to be identified because the talks are private. A final deal may take months because Fiat and the trust disagree over the value of the shares, they said.

Marchionne is evaluating options that include a bridge loan to complete the deal, two of the people said. The Italian carmaker may pay around 2.23 billion euros ($2.98 billion) to buy the remaining stake, according to an estimate from Goldman Sachs Group Inc., which sees a deal possible within 12 months.

Marchionne is relying on Auburn Hills-based Chrysler to sustain earnings as he works to end losses at Fiat's mass-market brands in Europe by 2015 at the earliest. The Italian carmaker, which would have posted a 1.04 billion-euro loss in 2012 without Chrysler, has been looking to buy the remaining stake to get access to the American automaker's cash and push integration of the two.

“We believe the deal remains inevitable,” said Max Warburton, an analyst at Bernstein Research. “The move will allow Fiat and Chrysler to pool cash in due course and ensure that Chrysler’s cash generation can support Fiat.”

Fiat representatives declined to comment on possible financing talks.

Marchionne, who targets increasing 2013 profits to as much as 4.5 billion euros from 3.81 billion euros last year, said this month he's confident of completing a merger with Chrysler and solving the issue with the trust by the end of 2014.

Fiat may seek to buy the remaining holding before an IPO because the Italian company has no interest in “diluting” control, Marchionne said last month, adding that an IPO may be ready by the fourth quarter.

An IPO process may help in setting the price for the stake, Warburton said. Fiat will have to pay from 1.36 billion euros to 3.3 billion euros for the holding, he estimated.

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